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Low labor costs, favorable policies make Cambodia an attractive investment destination


Low labor costs favorable policies make Cambodia an attractive investmentA fast developing nation, Cambodia has not received any orders for garments since May this year. And as a CCF Group report suggests, around 256 garment, footwear and travel goods factories in the country have suspended operations, affecting over 130,000 workers. A report by the National Bank of Cambodia highlights, garment exports by the country have diminished by over 5 per cent to approximately $3.78 billion in the first half of this year. Imports too have declined by 5 per cent due to a 15 per cent drop in import of garment raw materials. Textile and garment raw materials have declined due to interrupted supply from China, which was affected by tough COVID-19 restrictions in early 2020.

GMAC stalls minimum wage discussions

As per the country’s labor ministry, garment factories have not received any orders since May this year. Around 256 garment, footwear and travel goods factories in the country have suspended operations while 169 tourism companies too have temporarily closed their manufacturing units, laying off around 16,891 workers. The Cambodian government has decided to pay $70 a month to each unemployed worker.

The Garment Manufacturers Association in Cambodia (GMAC) has requested the labor ministry to stall minimum wage negotiations in textile, garment, and footwear sectorLow labor costs favorable policies make Cambodia an attractive investment destination for 2021 while Better Factories Cambodia (BFC) has started a hotline number to protect workers in the garment, footwear, travel goods and bag industries against the spread of COVID-19.

The Cambodian government has also permitted GMAC to produce all kinds of face masks, medical equipment and protective clothing for domestic consumption and export them under the threat of rapid spread of COVID-19.

EBA suspension to cause further unemployment

Meanwhile GMAC and the Cambodia Footwear Association (CFA) have requested the EU to postpone partial withdrawal of the Everything but Arms agreement (EBA). EU had earlier suspended Cambodia’s eligibility for EBA due to gross violations of human rights in the country. On June 2, the GMAC, CFA and with European Chamber of Commerce (Eurochambers) sent a letter to EU requesting it to postpone the scheduled August 12 implementation of the partial suspension of EBA benefits for Cambodia.

GMAC argues COVID-19 has already devastated conditions of Cambodian workers. Partial EBA would serve as a double blow to the countries textile and garment sector and prevent further employment in the sectors.

New FTAs to boost exports and investments

Cambodia is finalizing Free Trade Agreements (FTAs) with China and South Korea. These FTAs are expected to boost exports and raw material investments and boost bilateral trade $10 billion by 2023. And the new investment law will help Cambodia attract new investors and sign more agreements with South Korea, Japan, UK, India, Mongolia, the Eurasian Economic Union (EAEU) and the US.

As per a Fitch Solutions report, China reduction of apparel manufacturing operations has encouraged Cambodia to expand its manufacturing services to North America and Euro. Low labor costs and favorable investment policies along with full foreign equity ownership in textiles is further supporting this shift. The country not only imports its raw materials from China but also uses its transport facilities.